For investors looking for a dependable source of passive income, a systematic screening process is needed to distinguish truly lasting dividend payers from risky high-yield situations. A frequent method uses criteria to find companies that not only provide a good dividend now but also have the fundamental financial capacity to keep and possibly raise those payments. This method usually centers on three main parts: a good dividend profile, acceptable profitability to support the payout, and sound financial condition to endure economic challenges. Using these criteria, investors can create a list of companies that deserve more examination.
SHOE CARNIVAL INC (NASDAQ:SCVL) appears as a candidate from this kind of screening method. The footwear retailer, which runs many stores in the United States under the Shoe Carnival, Shoe Station, and Rogan’s names, shows a profile that matches the main standards for dividend-focused investors. An inspection of its basic metrics shows why it is notable in the present market environment.
Dividend Strength and Sustainability
The foundation of any dividend investment is the payout itself, and Shoe Carnival performs well on several important measures. The company’s dividend profile shows both good current income and a strong history of dedication to shareholders.
- Good Yield: SCVL presently provides a yearly dividend yield of 3.26%. This is higher than the industry average of 2.20% and the wider S&P 500 average of about 1.82%, offering a good level of current income.
- Strong Growth History: Possibly more significant than the yield alone is the growth behind it. Shoe Carnival has raised its dividend at an average yearly rate of 22.78% over the last five years. Also, the company has paid a dividend for at least ten years without a decrease, creating a dependable history that dividend investors appreciate.
- Sustainable Payout Ratio: A high yield is not useful if it cannot be maintained. Here, SCVL shows good strength. The company pays out only 28.17% of its earnings as dividends. This low payout ratio gives a large safety margin, meaning the dividend is secure and allows room for putting money back into the business or future dividend raises, even if earnings experience short-term difficulty.
Basic Profitability and Financial Condition
A lasting dividend is supported by a base of a profitable and financially stable business. These are the criteria that help avoid companies where a high yield signals trouble instead of shareholder reward. Shoe Carnival’s scores in these areas back its dividend case.
- Acceptable Profitability: The company receives an acceptable profitability score, supported by good margins. Its profit margin of 5.06% and operating margin of 6.12% are better than most of its competitors in the specialty retail industry. This steady ability to create profit is what finally provides the money for dividend payments.
- Outstanding Financial Condition: SCVL’s financial condition score is especially notable. A main part of this strength is its balance sheet: the company has no debt. A zero debt-to-equity ratio puts it with the best in its field and eliminates the danger of dividend reductions from heavy interest costs or loan agreement limits. Also, its current ratio of 4.05 shows more than enough cash to cover short-term bills.
Valuation and Growth Points
While the screen focuses on dividend, profitability, and condition, a full view requires checking valuation and growth possibilities.
- Fair Valuation: From a valuation angle, SCVL seems fairly priced. Its Price/Earnings (P/E) ratio of 9.75 is much lower than both the industry and the S&P 500 averages. Similar value is seen in its Price/Forward Earnings and Enterprise Value/EBITDA ratios, indicating the stock is not priced too high compared to its present earnings ability.
- Growth Difficulties: The main area of worry is in growth. The company’s revenue and earnings per share fell over the past year, and analysts think this pattern will continue soon, with EPS predicted to drop. This shows the value of the screening standards: the company’s strong condition and low payout ratio are important protections that help safeguard the dividend during a possible earnings drop.
Conclusion
SHOE CARNIVAL INC makes a good case for dividend investors using a quality-centered screening strategy. The company joins an above-average and rising yield with a very sustainable payout ratio, all backed by a profitable business model and a very strong, debt-free balance sheet. While short-term growth obstacles are clear, the basic filters of high dividend quality, acceptable profitability, and very good condition are exactly meant to find companies that can handle such times without putting shareholder returns at risk. Investors should balance the attractive income and financial strength against the difficult growth view.
For investors wanting to examine other companies that meet similar standards for lasting dividend investing, you can see the complete results of the screening method here.
Disclaimer: This article is for information only and does not make up financial advice, a suggestion, or an offer or request to buy or sell any securities. The information given is based on supplied data and basic analysis, which has built-in limits and may not show all important factors. Investors should do their own complete research and think about their personal money situation and risk comfort before making any investment choices. Past results do not guarantee future outcomes.
